International Journal of Research in Engineering and Science (IJRES) ISSN (Online): 2320-9364, ISSN (Print): 2320-9356 www.ijres.org Volume 5 Issue 8 ǁ August. 2017 ǁ PP. 23-31
Design and Implementation Decision Support System using MADM Methode for Bank Loans *
Irfan Fauzi1, Hadi Suyono2, Rini Nur Hasanah3
1
(Faculty of Engineering, University of Brawijaya, Malang, Indonesia) *Corresponding author**Irfan Fauzi
ABSTRACT: The function of banking process can be broadly defined as an institution functioning as a capital receiver and lender, as well as support for trading and payment transactions. In order to maintain the stability of the economy through lending, Bank Indonesia issued a form letter on March 15, 2012 on the application of risk management for the bank conducting credit. In an effort to minimize these problems, Bank Indonesia recommends the precautionary principle in arranging the loan terms and choose the prospective customer in the credit granting institutions, both banks and cooperatives to take into account the risk on lending. A method is needed to select bank for credit applications to the public, i.e. the customer. This research uses the comparison of MADM (Multiple Attribute Decision Making) between TOPSIS (Technique for Order Preference by Similarity to Ideal Solution) method and ELECTRE (ELimination Et Choix TRaduisant la realitE) method for the loan provisions to the customers. With the hope of getting the quickest and the most accurate solutions, the hesitancy in determining customers for lending can then be minimized. Keywords: MADM, TOPSIS, ELECTRE, Loans, Bank.
I.
INTRODUCTION
Economic growth of a region can not be separated from the role of financial institutions or banks in an effort to provide services to the community. According to Indonesian Banking Law number 10 of 1998, the bank is a business entity that collects funds from the community and channeled back to the community in the form of credit in order to improve the living standard. Thus, the function of the broader banking can be defined as a functioning institution of the recipient and the lender, as well as the launching of trade and payment transactions.In an effort to maintain the stability of the economy through this policy, Bank Indonesia issued a circular on March 15, 2012 regarding the implementation of risk management at the bank conducting the credit. Many institutions of both commercial bank and non-bank institutions issued credit policy to the public either in the form of cash loans or credit cards. These cash loans are usually reserved for working capital, investment, and consumption. As for credit card users, they are usually charged at the end of the usage period. With such a crediting system, the problem of non-performing loans and unfavorable payments affecting the collectivity of banks can not be avoided. As an effort to minimize the problem, Bank Indonesia recommends prudential principles in regulating credit requirements and selecting prospective customers in credit institutions, both banks and cooperatives by taking into account the risks in lending. Based on information collected from banks, the current level of nonperforming loans has generally declined, but is still relatively as high as 2.15% from the previous year. This does not include the effort of coercion of credit against SMEs (small and medium-sized enterprises) that greatly trigger the occurrence of NPL (non perfoming loan) or bad debts in the banking, thus requiring careful selection of SME credit to the community. In this case, marketings and surveyors play a very important role, since they know the real situation of prospective customers down to the field. Marketings are employees assigned to offer credit services to prospective customers, while surveyors are officers who conduct surveys on potential customers, and both of them understand the real customers’ situation. Therefore, a method for banking is required to select credit application to the customer. The loan application is given on the basis of predetermined credit policy criteria in order to obtain the priority of the customer to be given an optimal loan. This application can reduce the risk of bad debts and give benefit to both parties. One of the DSS (decision support system) modeling used in decision making to establish the best criteria from a number of alternatives based on certain criteria is MADM (Multiple-Attribute Decision Making). This method is choosen mainly because the customer selection process dealed with various criteria and subcriteria as foundation of loan applications.MADM is used to solve problems in discrete space, with several methods that can be used in MADM, including SAW (Simple Additive Weighting), WP (Weighted Product), ELECTRE (ELimination Et Choix Traduisant la Realité - ELimination and Choice Expressing REality), TOPSIS (Technique for Order Preference by Similiarty to Ideal Solution), and AHP (Analytic Hierarchy Process) [1]. www.ijres.org
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